Iwata says "new business structure" may be in order as Wii U, 3DS falter.

Update (Jan. 20): In its report on Iwata's Friday press conference, the Wall Street Journal paraphrased the Nintendo president as saying that smartphones should be used to "make people aware of Nintendo’s games, and encourage them to try out the console version of the games."

“The spread of smart devices does not spell the end of game consoles. It’s not that simple,” Iwata said. “It doesn’t mean that we should put Mario on smartphones."

Original Story

What a difference a failing console makes. Just hours after announcing severely scaled back projections for fiscal year Wii U sales and after projections of yet another fiscal year loss, Nintendo President Satoru Iwata told the audience at an Osaka press conference today that the company might look to smartphones to change up its struggling business.

"We are thinking about a new business structure," Iwata told the press, according to a Bloomberg News report. "Given the expansion of smart devices, we are naturally studying how smart devices can be used to grow the game-player business. It's not as simple as enabling Mario to move on a smartphone."

“We cannot continue a business without winning,” he continued. “We must take a skeptical approach [to] whether we can still simply make game players, offer them in the same way as in the past for 20,000 yen or 30,000 yen, and sell titles for a couple of thousand yen each.”

That's not an ironclad confirmation that Nintendo is looking to develop directly for the phone market, of course, but it's the largest sign yet that the company is strongly considering such a move. Then again, a careful reading could suggest that Nintendo is simply looking at smartphones as companion devices to consoles like the Wii U. Nintendo has recently opened up its Miiverse messaging service to work between the Wii U and mobile platforms, so Iwata's statement could also be hinting at an expansion of that kind of connection.

Still, the suggestion of "enabling Mario to move on a smartphone" suggests there's more behind Iwata's statements than that. That's especially true when paired with mention of a "new business structure," like, say, one where Nintendo focuses on making software rather than continuing to make hardware.

It wouldn't be unprecedented for the company; Nintendo made versions of its arcade hit for consoles from the likes of Atari and Coleco before it had its own consoles, and the company licensed its characters for games on the PC and CD-i into the '90s. Nintendo is far from the grave financial straits that led Sega to abandon the hardware market after the Dreamcast's failure—it took a half-decade of failed systems like the 32X and Saturn to force Sega's hand. Still, Nintendo may be interpreting the writing on the wall and looking to diversify a bit sooner than its former 16-bit competitor did. Or Nintendo may just see smartphone software development as a potential supplement to its existing hardware business, ahead of a Sega-style transition. Or neither of these things. It's all quite speculative at the moment, of course.

Iwata's smartphone talk could also suggest a lack of faith in the future of the 3DS. As that portable system approaches the conclusion of its third year on the market, research analyst Michael Pachter notes that the system is selling "fine" but is still down 50 percent compared to DS levels last decade.

Nintendo is revising its expectations for fiscal year 3DS sales downward as well, from 18 million units to 13.5 million units worldwide. That's not as drastic as the 50 percent reduction in sales expectations for the Wii U, but it's enough to suggest that Nintendo may have been surprised by how much mobile systems are eating into the market for dedicated portable gaming systems—a market that has been a rock-solid cash cow for Nintendo since the days of the original Game Boy.

In the past, we've suggested on these virtual pages that Nintendo would be crazy to slit its own throat by making games for smartphones, but that was 2.5 years and a few major system launches ago. Back in 2012, when the 3DS was struggling in the marketplace more than it is today, I used the popularity of a fake Pokemon app on the iOS app store to suggest that Nintendo might be wise to look at taking a bite of Apple's market. "Why continue to struggle building an audience for your own mobile platform when Apple already has an established device with an audience that's obviously desperate for your software? In other words, why continue to try to beat the IP thieves when you can instead join them?"

Nothing is certain, but it looks like Nintendo may finally be warming to that view.

I've thought it would be cool if Nintendo made a "gaming smartphone," with the features of a regular smartphone, like texting and calling, and the features of a handheld console, like a slot for DS and 3DS games and physical buttons.

I've been saying for years that Nintendo should go the way of Sony and become a software company rather than a hardware company. Looks like this is a step towards that reality.

Did you mean Sega, rather than Sony?

Sega had to do it because they were punted out of the console race and had nothing compelling in the portable space. Up until the Wii U, Nintendo was doing pretty well in hardware sales and the 3DS is still the biggest handheld console and sells a hell of a lot of software.

I've thought it would be cool if Nintendo made a "gaming smartphone," with the features of a regular smartphone, like texting and calling, and the features of a handheld console, like a slot for DS and 3DS games and physical buttons.

That... sounds awesome!

I might finally get off my duff and pick up a new smartphone (mine's only 5 years old)

I would LOVE to play new titles for the DS like Pokemon and the new Zelda but I just cannot justify buying a DS just to play one or two games. If said game was made available for android I would but it right away for my tablet.

Don't devalue the title at $0.99, keep the $20-30 price point, people will still buy them.

The Wii U is a different story with unique hardware comes unique game mechanics.

I hope they follow up with this, Nintendo as a gaming publisher on a wide array of platforms would be a killer competitor to EA and Ubi, and it could free up resources internally to push a better quantity and quality of the games people want to play.

Starting the process now would be ideal, keep up support for the existing 3DS and WiiU platforms, but drop plans for future platforms, and start planning the next software generation to be on XB1/PS4 and iOS/Android/WinPhone.

This is actually disappointing to hear for me, and not for the handheld implications.

I imagine if they're willing (or at least considering) stepping out of the handheld race where they have their strongest foothold, that their home console line will follow. I'm not saying their last iterations of consoles have been the greatest, but I do appreciate Nintendo for at least *trying* to be different (whether or not those attempts were decent is a different story).

Still, I'll always remember the Wii as the "Red Steel 2 machine" because Red Steel 2 is one of the top 3 FPSes, maybe top 5 games even, I've played just because of how unique it was. The FPS genre is pretty bland to me on the whole and Red Steel 2 offered something only the Wii (with motion plus) could offer. I know that silly PS3 wand pair exists, but... who even made games for that?

Surely kids and casual gamers (important Nintendo demographics) are doing a lot of gaming on phones and tablets these days. Nintendo has to draw a line in the sand when it comes to portable gaming. Wii U low sales are one thing, but they can't get squeezed out on portable gaming or they are finished. If I were them I'd at least take a look at building a Nintendo tablet.

They have to sell the same game 39( 30 time + 9 additional units to cover the 30% commission ) times compared to once to make the same amount of money. They recieve nearly 100% of the money when they sell a portable console or console version of their own games.

I don't see them abandoning hardware. The GameCube was pretty catastrophic and they bounced back from that.

As an owner of a WiiU the biggest downfall, by far, for the system is the lack of games. So if they can't even make games for their own console, why would they split efforts to make games for other people's consoles? The Wii didn't sell because of a waggle controller, the Wii sold because of Wii Sports. The Wii U doesn't have a Wii Sports, or any really compelling software.

The only thing that would make ANY sense to me, is taking the shareware model from the early 90's. Make a Mario Lite for the phone, that had half a dozen levels, and then advertised the full version for the WiiU.

They have to sell the same game 39( 30 time + 9 additional units to cover the 30% commission ) times compared to once to make the same amount of money. They recieve nearly 100% of the money when they sell a portable console or console version of their own games.

Unless of course they take the considerably saner route and port things like old NES and original Game Boy games that already sell on the virtual console services for five bucks and under, and then charge five bucks for those things.

I'm so tired of people making Wii U to Dreamcast comparisons. There's about zillion other last products of whatever by whoever to compare Wii U against.

Because Wii U and Dreamcast are so different. Dreamcast had a truly amazing game library. Sega really went all in. Without doubt it had the best 1st party games of it's generation and actually -with the risk of sounding like a brainless Dreamcast fanboi- the best 1st party games of any console, ever. And Sega wasn't just luke warming old past-sell-date franchises. See, for example, Jet Set Radio, Shen Mue and Chu Chu Rocket and Samba De Amigo. Dreamcast also had quite decent 3rd party support as well. It had for it's time good on-line features. Actually, it even had gimmicky controller (VMU) just like Wii U, but that's just about only thing the two consoles have in common.

Wii U on the other hand... seems like even Nintendo doesn't really give a crap. Dreamcast deserved to succeed. Nintendo deserves to fail with Wii U.

This sounds less like 'we are giving up hardware' and more like 'In addition to our current business models we will support smartphones/tablets'

If they do end up with something on the smartphone/tablet space, it will most likely be a spinoff type game, not a mainline title. You may not get a Mario game, but you might get Dr. Mario or something.

They may possibly release older titles on the smartphones (Super Mario, Duck Hunt, original Metroid, etc).

But if you want the latest and greatest, you're going to need to buy their systems.

"Doing fine" is what we're calling on track to being their 2nd best selling handheld huh. Here's the thing: whatever 50% patcher is talking about doesn't make a lot of sense. The 3DS is around 40 mil right now. It's not too far behind the original DS, which had the benefit from a holiday release. It's about 10 mil behind despite that AND it had a rougher start.

So there's nothing wrong there. Whatever they do won't devalue their market there so we've got a lot of speculation over nothing.

They have to sell the same game 39( 30 time + 9 additional units to cover the 30% commission ) times compared to once to make the same amount of money. They recieve nearly 100% of the money when they sell a portable console or console version of their own games.

Digital sales of their own games, sure. Physical sales still get a large chunk ripped out due to retailer and wholesale cuts, plus manufacturing concerns. So I'd say it won't be significantly different, plus there's no upfront manufacturing costs or need for additional printing runs. They could do a worldwide launch with a lot less complications.

Yeah. Make sure you price your mobile games like Squarenix and watch sales take off like a rocket!

...exploding seconds after launch.

If they're getting the ROI they wanted, I don't expect prices to change much. Certainly, the games I've seen them do on my Windows Phone seem worth the price. At least they're not cheap or free with micro transactions!

I've thought it would be cool if Nintendo made a "gaming smartphone," with the features of a regular smartphone, like texting and calling, and the features of a handheld console, like a slot for DS and 3DS games and physical buttons.

So, a variation on the Sony Experia Play? Or a PS Vita with a phone app?

Wasn't there a modem cart or phone cart or something like that that would turn a GameBoy into a phone?

I'm cool with diversifying but I do hope they don't weaken the console/handheld offerings to do it. I freakin' hate touch controls. I really enjoy using the Wii U and 3DS hardware. Just wish I had a few more games for the former. I wouldn't mind seeing Nintendo just release a normal damn console with their current focus on simply gaming.

Give me Zelda and Metroid on the PS4 or XBone. They can keep Mario to the other platforms, but these two franchises at least could truly benefit from a modern system with Nintendo quality software behind it. I would buy one or both systems tomorrow to play these games.

As if Nintendo is that stupid or desperate. If they do make the move, I'd be shocked if they didn't charge premium prices for premium software.

Which would be fine, because Nintendo isn't producing games on the level of Zynga, King or Rovio. I'd expect the same level of quality to be there, which would still warrant the prices they currently ask for DS/3DS titles, though maybe a tad less because you wouldn't be buying anything physical (then again, that's never stopped digital PC games from costing the same . . . .)

Kyle Orland / Kyle is the Senior Gaming Editor at Ars Technica, specializing in video game hardware and software. He has journalism and computer science degrees from University of Maryland. He is based in Pittsburgh, PA.